Thermal coal long-term forecasts cool down

Goldman Sachs has reiterated its thermal coal price forecasts but the long-term outlook for the commodity is less compelling, undermined by a preference for cleaner energy.

The broker attributed a “cautious" tag to its forecasts for 2014-16 which range from $US83 a tonne to $US86 a tonne.

“We believe that current prices are sufficient to keep the market well supplied and to meet modest demand growth," analyst Christian Lelong said in a report to clients on Wednesday.

Taking a longer-dated view, Goldman identified pressures from environmental regulation and an incentive to invest in alternative sources of energy from carbon price trends.

Perhaps more critically, “India and other emerging markets are unlikely to match the scale of the China-led surge in demand for seaborne thermal coal in the [past four years]."

Goldman anticipates that the coal industry will become more productive as the pace of demand slows.

But this could come at the expense of prices: “This could prove to be a mixed blessing for producers because higher volumes and lower costs at a company level imply an industry-wide downward shift in the cost curve." the broker said.